Monday, March 17, 2014

Vietnam cuts rate 50 bps to boost growth as inflation falls

Vietnam's central bank cut its main interest rates, including the benchmark refinancing rate by 50 basis points to 6.50 percent, to help strengthen economic activity while inflation is slowing.
Nguyen Thi Hong, head of the State Bank of Vietnam's monetary policy department, told a press conference that from early 2014 the central bank had been actively implementing measures to control inflation, stabilize the economy and "support economic growth at a reasonable level to ensure the liquidity of credit institutions and the economy."
She also said that the world economy continues to be positive, with the U.S. economy forecast to strengthen and become more resilient, according to a statement by the central bank.
Vietnam's central bank cut its refinancing rate by 200 basis points in 2013, with the last cut in May last year, after slashing rates by 600 basis points in 2012.
Vietnam's inflation rate fell to 4.65 percent in February, the lowest rate November 2009, and down from 5.45 percent in January. The government has targeted 7 percent inflation this year but Hong said it could be below 7 percent this year compared with 2013's 6.6 percent.
In addition to cutting the refinancing rate, the State Bank cut the rediscount rate to 4.5 percent from 5.0 percent and the overnight leading rate to 7.5 percent. The maximum rate on deposits from 1 to 6 months was cut to 6.0 percent from 7.0 percent, and deposits of 6 months of more was cut to 6.5 percent from 7.5 percent.
The State Bank added that foreign exchange reserves were rising and the currency market stable.
Last month the State Bank's governor said he was continuing to ask commercial banks to cut their rates to businesses by 1-2 percent after last year's cut to deposit and benchmark rates. The government wants to boost credit by 12-14 percent this year following 2013's rise of 12.5 percent.
Vietnam's Gross Domestic Product expanded by an annual 6.04 percent in the fourth quarter of 2013, up from 5.54 percent in the third quarter.
The economy expanded by 5.4 percent in 2013 and the government has targeted 5.8 percent growth this year.